Stay informed with free updates
Simply sign up to the Equities myFT Digest — delivered directly to your inbox.
US stocks hovered around levels on Friday that all but erased the rollercoaster ride suffered by investors this week.
By mid-afternoon in New York, the benchmark S&P 500 and the tech-heavy Nasdaq were about 0.4 per cent higher on the day, leaving both little changed since last Friday’s close after a week that included some of the benchmarks’ worst and best days in almost two years.
The stabilisation followed a global sell-off sparked by weak US jobs figures a week ago, which snowballed into a full-scale rout on Monday.
The subsequent rebound was encouraged by better signals on the health of the US labour market on Thursday as unemployment claims fell faster than expected.
Although most big equity markets have recovered the bulk of Monday’s losses, global indices remain below the levels seen before the US jobs report last week that first sparked concerns about the health of the world’s biggest economy and sparked the selling spree. The S&P now stands about 2 per cent below its pre-sell-off close, and the Nasdaq about 3 per cent.
“We are not completely out of the woods,” said Beata Manthey, head of European equity research at Citigroup.
“The markets look more reasonably priced after the correction. However, the fact that the positioning has not unwound fully yet means that even though the worst could be behind us, the market is extremely sensitive and vulnerable to any news flow.”
US investors were picking over the damage wrought on individual stocks by the week’s drama. As of Friday morning, more than two-thirds of the S&P 500 remain above the 200-day moving average of their share price, according to analysts at Bespoke Investment Group.
Moving averages are widely-watched gauges of the scale of market moves. Breaking below long-term averages typically signals a deep change in investor mood.
“In terms of the current pullback, we have yet to see real damage to the market’s longer-term uptrend and that’s true at the individual stock level as well,” they wrote in a note to clients.
European stocks rose, with the Stoxx Europe 600 index gaining 0.6 per cent to close marginally above the level it ended last week. France’s Cac 40 increased 0.3 per cent, while Germany’s Dax rose 0.2 per cent and the UK’s FTSE 100 was up 0.3 per cent.
Earlier, Asian stocks rebounded, with Japan’s Topix closing 1 per cent higher, while South Korea’s Kospi and Hong Kong’s Hang Seng rose 1.2 per cent.
Friday’s relative calm followed data showing that new US applications for unemployment aid — seen as a proxy for job cuts — had fallen to their lowest level in a month.
Figures on Thursday gave a reading of 233,000 for initial state unemployment claims in the week ending August 3 on a seasonally adjusted basis, down from the previous week’s upwardly revised level of 250,000 — and below economists’ forecasts of 240,000.
“It was the jobs report last week that sent markets into a tailspin,” said Kristina Hooper, chief global market strategist at Invesco, so “it makes sense it was a labour market point that would calm markets” this week.
Japan had borne the brunt of Monday’s sell-off, with the Topix dropping 12 per cent in a single trading session. It rebounded the following day with the biggest one-day gain since 2008, as investors decided the decline had been wildly overdone. On Friday, the Topix was 3 per cent lower on the market close a week earlier.
“Volatility is still high, so we may continue to see market fluctuations [in Japan], said Naoya Fuji, equity strategist at Nomura, who emphasised that strong corporate earnings, share buybacks and better corporate governance had helped the Japanese market recover from Monday’s shock sell-off.